Pakistan’s Prime Minister, Mr. Shahid Khaqqan Abbasi while speaking to a foreign newspaper has remarked that Government has no plans to devalue the local currency. Commenting on the recent Rupee devaluation in the Forex markets, he said the Rupee devaluation is not on Government’s Agenda and market forces are to determine the rate.
Traders, Importers were surprised last Friday after Rupee suddenly declined against the Dollar by more than 4.87% or 5 Rupees hitting 110.75/111.50 during Friday last week.
Analysts have warned that the sudden depreciation will have negative consequences for the economy as Pakistan’s trade balance continues to be skewed towards imports. “Rupee devaluation will have a non-existent impact on the economy,” is what he said when asked about the impact of exchange rate fluctuation on the overall health of the economy.
“Inflation is expected to rise by a mere 0.5 percent” from current rate adjustment in the markets, remarked Mr. Khaqqan Abbasi. Economic Commentators have raised red signals over the sudden changes in exchange rate as one fourth of Pakistan’s total imports include Petroleum products. Energy imports have been a bug nuisance for the economy, as Pakistan seeks to satiate the demand of rising population by importing fuel from Middle East. Oil prices have been at historic lows in the international markets whereas during the last four months due to a concerted effort from OPEC and non-OPEC member prices have risen sharply.
Pakistan’s twin deficits have posed a huge problem for the economy as exports have taken a hit despite Government’s numerous efforts. According to Mr. Abbasi, “Rupee devaluation will have a negative impact on Trade and Current Account Deficit” in the long run. The logic of the timing for devaluation has been questioned by various economists and analysts, who say the rise in twin deficits has been increasing since last four years and Government’s cornered itself into believing that the Rupee devaluation is the only solution to the problem.
On the future of Rupee vs Dollar parity, PM Khaqqan Abbasi said that in near future, “Market will determine the rate of Rupee” without any intervention from the Government.
